16 Industrialization in Sub-Saharan Africa
for the region to negotiate and implement policies on tariffs, nontariff barriers, and competitive exchange rate regimes. Such policies would facilitate more open, predictable, and transparent trade relations; expand market access with trading partners; and build and strengthen existing links to GVCs. Reducing trade barriers is a necessary condition for integrating into GVCs and strengthening links, particularly for resource-rich countries that need to import production equipment and intermediate inputs at lower costs to add value to natural resources for export, because high import barriers directly influence firms’ costs of importing or exporting and, hence, participation in GVCs. Furthermore, external trade policies that facilitate access to export markets would be beneficial to firms in manufacturing GVCs that engage in textiles and apparel exports, agro-processing, and processing of natural resources before export, activities in which Sub-Saharan African countries have a natural comparative advantage and where they can leverage the most gains. A regional industrial policy in the context of the African Continental Free Trade Area could bolster scale economies and complementarities to drive more production, processing, and higher-value exports from the region, and facilitate industrialization through GVCs. In addition, the agreement should be designed to promote, produce, and export specific manufactured products within the regional market based on country-specific comparative advantages (Odijie 2018). In this respect, countries in the region are heterogeneous and have different comparative advantages that can be exploited to develop regional value chains in manufacturing.
A Policy Framework for Industrializing along Global Value Chains: Integrate, Compete, Upgrade, Enable The prospects for industrialization in African countries depend on their capacity to participate and upgrade in manufacturing GVCs and are bound to vary across countries based on resource endowments, geography, and level of development. Building that capacity, however, requires an appropriate industrial policy package that combines soft policies and hard policies. Soft industrial policies aim to support the growth and productivity of all sectors in the economy, whereas hard policies focus on developing traditional manufacturing, building sectors with some characteristics of manufacturing, and promoting indigenous entrepreneurship in small-scale manufacturing. The design of such policy configurations must factor in, and be consistent with, country-specific characteristics, given the wide variation in resources, income, size, and level of industrialization across countries in Sub-Saharan Africa.
